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Burberry Profits Surge As Sales Increase 17%

Burberry Group plc shrugged off worries of faltering consumer confidence Wednesday, noting demand for high-end accessories and strong sales in the U.S. pushed its profits up 22.6 percent to 135.2 million pounds, or $271.4 million, in the year ended...

LONDON — Burberry Group plc shrugged off worries of faltering consumer confidence Wednesday, noting demand for high-end accessories and strong sales in the U.S. pushed its profits up 22.6 percent to 135.2 million pounds, or $271.4 million, in the year ended March 31.

In the previous year, the company’s profits came in at 110.2 million pounds, or $221.2 million.

Burberry registered full-year sales of 995.4 million pounds, or $1.99 billion, up 17 percent from 850.3 million pounds, or $1.7 billion, in the same period last year. All dollar figures have been converted at average exchange rates.

“[The results] demonstrate the robustness of our global luxury business in these challenging times, with consistent performance across our regions, channels and products,” said Angela Ahrendts, chief executive officer of Burberry.

A one-off profit of 15.1 million pounds, or $30.3 million, from the sale of Burberry’s Haymarket headquarters in advance of a relocation planned for later this year, further boosted the company’s bottom line.

Alongside this, Burberry attributed the rise in profits to the growth in sales of its luxury handbags and shoes, with non-apparel revenues shooting up 37 percent in the year to 289.7 million pounds, or $581 million. Women’s wear, meanwhile, grew 13 percent to 345.2 million pounds, or $692 million. The company has increased its retail space by 12 percent during the year, opening 20 mainline stores and 49 concessions.

During a results presentation Wednesday, Ahrendts highlighted children’s wear and shoes as key areas of future growth for the company, saying Burberry expects those categories to each represent 10 percent of total revenues in five years. Sales of women’s shoes have doubled over the past year, and Ahrendts said the average unit retail price of footwear increased 20 percent during the year.

And despite jitters in the U.S. economy, the company said it recorded a 19 percent rise in turnover in North America, excluding licensing revenues, to 234.8 million pounds, or $471.3 million, driven by sales of outerwear and strong performances in Burberry stores.

“We play very broad across different product categories [in the region],” Ahrendts told WWD Wednesday.

Stacey Cartwright, Burberry’s finance director, added the brand hasn’t been impacted by the downturn in the U.S. economy as it is still “playing catch-up” in terms of penetrating the market. The company will open between eight and 10 stores in the region during the current financial year. It will also refurbish its Beverly Hills and Las Vegas doors. “We have clusters of stores in high-demand markets, where there tend to be higher percentages of tourism,” said Ahrendts, adding the influx of Chinese and Middle Eastern tourists to the region is bolstering sales. “[Our] modern classic positioning plays so strongly in that market,” she added.

By region, retail and wholesale sales in Europe, excluding Spain, grew 27 percent during the year, to 291.8 million pounds, or $585.7 million. In Spain, sales rose just 6 percent, reflecting what the company called the country’s “difficult economy.” Cartwright added the company “doesn’t have the insulation” of being positioned as a luxury brand in the country.

Retail and wholesale sales in the Asia-Pacific region grew 13 percent to 189.1 million pounds, or $379.5 million. The company said wholesale sales in emerging markets, including China, the Middle East, Russia and India, rose 50 percent year-over-year. Between 15 and 20 store openings are planned in those markets in conjunction with Burberry’s franchisees in the current fiscal year.

Ahrendts acknowledged “consumer sentiment had been affected” by the recent earthquake in Sichuan, China, but said the market is relatively small for the company. She added tourist spending in major Chinese cities would offset any dip in local spend in the region.

However, the company said overall retail sales during the second half of the 2008 financial year “had come in modestly behind plan, with proportionately more inventory sold during the usual sale period.” Cartwright said the company expected wholesale sales during the six months ended September to increase by 10 percent overall and 20 percent in North America.

Burberry also broke out its sales to incorporate revenues from its licensed businesses, which include beauty and products such as sunglasses developed specifically for the Japanese market. Including licensing revenues, sales in Europe grew 35 percent in the year, to 364.5 million pounds, or $731 million, while in the U.S. they grew 20 percent, to 231.6 million pounds, or $464 million.

The company also said that improved sourcing and its new IT infrastructure, along with its wider IT and supply chain initiative, dubbed Project Atlas, delivered a 20 million pound, or $40.1 million, boost to profits. The company is planning to spend between 90 million and 95 million pounds, or between $186 million and $196 million, on capital expenditure during this financial year, which includes the cost of fitting out its new London headquarters, opening and refurbishing stores and its IT and supply chain projects.

Burberry’s share price fell 1.58 percent on the London Stock Exchange Wednesday to 499 pence, or $10 per share, following the results.

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